If you've read any number of these articles, you know the high level of importance I place on your credit score and credit score repair. They're like the permanent records your grade school teachers always warned you about come to life. Suddenly, every financial decision you've ever made is under the microscope for the lenders and creditors to see should you ever try for a loan.
But there's another side to your credit score - a misunderstood part. Most people do not have the first clue about what exactly goes into their credit score, through no real fault of their own. You can thank the Fair Isaac Corporation for that. They're the company behind the FICO credit scores, the most widely used credit scoring model in the U.S., and they like to play their cards close to the chest, meaning they do not let consumers or lenders know precisely how they calculate your score.
Since FICO does not ease anyone in on their secrets, it's up to the lenders and consumers two try and interpret their smoke signals, and that generally leads to confusion. So, in the interest of shining some light on your credit score and clearing up some of the confusion, here are five of the top myths about your score:
1st Your credit score is your permanent record. Like I said before, most people Equate their credit reports and scores to a report card for adults. And much like a report card and the grades that come with them, a lot of people only think about their scores when they actually see them. If their score is high, all is right with the world. If their score is not where they thought it would be though, they generally do not feel so hot, some of them even seeing their scores as a reflection of themselves.
But here's the thing: just like your grades in school, your credit score can, and usually will, change. There is not really anything permanent about it, it changes every time you look at it. So if you do not like what you see, you can work to change it.
2nd Even looking at your score will drive it down. A lot of people who check their credit reports may notice that they have a lot of inquiries on file, especially if they've been shopping for credit in the past few months. While it's true that having too many inquiries on your report can dock you a couple of points per inquiry, those are only the "hard" inquiries - those made by lenders and creditors into your file to determine your financial affairs. Anytime you check your credit score yourself, it's labeled as a "soft inquiry and does not ding your credit score.
3rd You need a balance of two build credit. You gotta spend money to make money. That saying may apply in some cases, but not two credits. You do not need to maintain a balance of two build up your credit. According to FICO, only 35% of your credit score is made up of your payment history, and many creditors are not looking to see Whether or not you carry a balance over each month on your credit cards. Worry about keeping current on your bills rather than what kind of balance you should maintain.
4th When you get married, so do your credit scores. While you do promise to stay with your spouse through richer or poor, your credit score does not. Even though your significant other's credit lines may show up on your credit report, and vice versa, after marriage, the individual credit reports remain as just that - individual. Your account may show up on their report, but it remains in your name - only accounts opened jointly affect both parties.
5th Disputing every negative item on your credit report boosts your score. This is certainly a myth I'm familiar with. A lot of credit repair companies tell you that the quickest and best way to dispute all negative items on your credit report. If the credit agency which do not respond within 30 days, the item will be wiped off your report, and your score will raise.
The problem with that is sometimes (usually) those items comeback. Not only that, you could also be taken two courts for lying about your accounts, and no one wants that. Rather than fall for empty promises, work on resolving any negative accounts legally, and if you need help, consult a credit repair service that can help you achieve your goals without relying on solid tactics.
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